The missing millions

By Paul BarryApril 9 2002

The tale of One.Tel's "missing revenue" is complex, but the essence of Jodee Rich and Mark Silbermann's story is this. When One.Tel's directors were assured at the crucial Board meeting on March 30 last year that the company was still on budget - and set to keep its promises - it was explained in great detail to James Packer, Lachlan Murdoch and others that at least $28.8 million of revenue was "yet to be billed" for the first three months of the year. Thus, it was neither necessary nor appropriate to show them One.Tel's management accounts, which did not count this "missing" money. Nor, according to Rich and Silbermann, was it necessary to warn them that the company was way off budget.

There are various difficulties with this story. First, One.Tel ran out of cash two months later, despite Rich and Silbermann's contention that this windfall was going to solve all of its problems. Second, if the company did bill an extra $28.8 million in April last year, the revenue for that month should have been far higher than normal, but it was not. Third, if this missing revenue was meant to bring One.Tel back on track - which is what the board was told - the April management accounts should show that happening, but they do not. One.Tel's profit actually fell another $11 million behind budget during that month, and the gap widened further in May. In other words, the figures don't support Rich and Silbermann's argument. Remarkably, Silbermann's response to this is that the management accounts must be "incomplete", or wrong.

Another difficulty is that key members of One.Tel's finance team reject the "missing revenue" story. They maintain that One.Tel ran out of cash because the company, and in particular the local call business, was losing millions of dollars more than anyone had bargained for.

But whatever Rich and Silbermann believed early last year about the cause of One.Tel's financial problems, there is little doubt they had a duty to inform the board that the company would miss its financial forecasts unless the "missing revenue" could be found and collected. Their story, of course, is that they did. One.Tel's non-executive directors and several of the company's senior staff say they didn't. The courts will have to decide whom to believe.

According to One.Tel's finance team, the collapse of the "missing revenue" story in mid-April left Rich and his lieutenants needing to pull another rabbit out of the hat, because they needed to find another $30 million somewhere else. Several senior staff were told by Rich to drop everything and work on building a multimillion-dollar damages claim against Telstra.");document.write("

advertisement

");
}
}
// -->

None of them was convinced that such a claim could be justified. Nor did they really know what they were looking for. And the more they searched, the more they became convinced that One.Tel had no case.

This was not what Rich told One.Tel's directors, nor is it what he and his acolytes have since told me. Their story is that the Telstra claim, valued at some $46 million, was not only genuine but was going to bring a large amount of cash into the company.